I. Will Crashing Inflation Bring Down Rates? Many Analysts Say Yes – Shockingly!
Economist James Thorne, posted this yesterday – and I thought it was a bold claim: “Contentious thesis. Next move by Fed will be a cut. And it will happen in 2026. Have a nice day.”
Welp, Mr. Thorne is running victory laps today because both CPI (consumer) and PPI (producer) inflation reports came in much cooler than expected.
Mr. Thorne is not alone, as Michael Gapen (Chief US Economist at Morgan Stanley) and Jeff Snider (perennial doomer and Eurodollar guy) have been predicting falling inflation for months now.
The recent soft inflation reports and the above predictions are so shocking because so many analysts – like Chris Whalen – have been and are predicting much hotter inflation because of tariffs, shortages brought on by the Iran war, and much higher energy prices.
This is mostly just another reminder to me that nobody has a clue as to what will really happen, and that most “experts” were wrong again, as many predicted much hotter inflation readings this month.
In any case, if anyone is depressed about the extreme likelihood of hotter inflation and higher rates, this week’s inflation reports and the likes of Mr. Thorne will hopefully make you un-depressed.
II. Nary a Week Goes By Without Us Getting a Townhome That an Agent Is Confusing With a Condo.
This matters so much now because townhomes are eligible for lower interest rates, and – more importantly – “condo concerns” are irrelevant because townhomes require minimal HOA scrutiny.
“Condo Concerns” include low owner-occupancy ratios, HOA litigation, low reserves, and insufficient coverage under the master insurance policy.
These issues often render condo projects non-warrantable or ineligible for Fannie, Freddie, and competitive jumbo financing.
And – even when condo issues are not present, condos are subject to higher interest rates when borrowers have an equity cushion of less than 25% (for a refi) or put less than 25% down.
Townhomes are also known as PUDs, detached PUDs, rowhomes, patio homes, zero-lot-line homes, and attached single-family residences.
The confusion comes from the fact that they often look just like condos!
And condos often look just like townhomes – particularly when they are built in an attached rowhome or two-story townhome style.
The primary difference is that with townhomes, owners own the lot beneath their unit.
With condos, the owners only own a pro-rata portion of the entire lot under the entire condo complex.
To tell whether or not a property is a condo or a townhome, we look at the zoning and the legal description in the property profile.
If there is a lot # and/or a small lot size, e.g., 2,500 square feet, it is a townhome for sure.
If there is no lot size or the lot size is “10 acres” (the size of an entire condo complex lot), it is a condo.
Property profiles sometimes get the zoning wrong, so that is why we look at legal descriptions too.
There is sort of a reverse exception to all this: site condos.
Site condos are DETACHED condo units – and they are ironically treated like townhomes for lending purposes.
